Teabox, the global speciality tea company, is the latest to received funding from Ratan Tata, Chairman Emeritus of Tata Sons. This is the fourth start-up in 2016 to receive the attention of Tata. As with Tata’s investments, this too is an undisclosed amount. The additional capital will be used to fuel Teabox’s growth as it expands to other major markets around the world.

What is significant about this investment is that, it is for the first time that Tata has invested in a tea company.

Ratan Tata with TeaBox founders.

Tata started off 2016 by first investing in Tracxn - a startup intelligence and market research platform, Dogspot – an online pet care platform, and Cashkaro – a cashbacks and coupon site.

Supplies premium tea

Kaushal Duggar, 32. a financial analyst, founded Teabox in 2012 with personal savings of around Rs 40,00,000.

“It is unique that Ratan Tata, who is the architect of the Tetley acquisition, has invested in Teabox,” says Dugar. “For Mr Tata to invest in a 200 year-old industry that is seeing a change with Teabox means a lot to us. It validates not just Teabox but also innovation in an industry that continues to follows archaic ways of functioning.”

Getting an investment is difficult, concedes Dugar, but what is even more difficult is to get Tata’s endorsement, he says with much excitement. Tata’s advice for Dugar was to `make Teabox a global brand.’

"Mr Tata's direct guidance and experience in the tea industry will surely help us grow Teabox to be the first global premium tea brand from India,” he says confidently.

Dugar comes from a family which has been traditionally involved in tea garden supplies – machinery, irrigation equipment, etc. Spending 8-9 years in Singapore, completing university studies and then working, he decided to come home to be an entrepreneur - an idea which he laughingly states was natural, `being a Marwari’.

He decided to focus on the business of tea as he was familiar and connected to the industry. Working at first with his brother Prateek who was into tea exports, Dugar learned the finer nuances of tea and its inherent characteristics. "He taught me what to look for in each of Darjeeling’s tea gardens and that opened a whole world of tea and tea quality for me," says Dugar.

The tea supply chain has a lot of intermediaries from the production stage to sorting units, storage centres, auction houses, that by the time tea is packaged and shipped, it reaches the customer three-six months after the tea leaf is plucked.

Tea companies in India have continued to rely on a legacy supply chain that has existed since the estates were first set up by British and Scottish planters over 200 years ago. “I wanted to improve the logistics and focus on high-end tea and ensure its quality by selling it only online directly to consumers, thus cutting off the intermediaries,” says Dugar. His idea met with a lot of resistance from family and friends. "How can you sell tea when the people buying it cannot even see or smell it," he was asked, adding truthfully that, that was a question to which he had no satisfactory answer.

Business model

In March 2014, Dugar got seed fund of $1 million from Accel Partners, investors of Angry Birds, Dropbox and Spotify. It raised $6 million Series A round of funds from Accel Partners, JAFCO Asia and a customer turned investor, which was a `great validation’ for Teabox, says Dugar.

Teabox is disrupting the $40 billion tea industry with its innovations in technology and the supply chain. Dugar says, “Our approach marks a clear departure from the norms of the tea industry. By applying innovations in design, supply chain and technology, we are able to offer a significantly better experience to customers across the world.

”One of the first things that Dugar did to disrupt the industry was to set up a cold storage unit for tea. This is unheard of in the industry, he says. After production, premium tea is affected by exposure to air and oxygen or if it is not packed properly. The company sources the highest­ quality teas directly from over 200 growers and estates in Darjeeling, Assam, the Nilgiris and Nepal. Within 24-48 hours after the teas are brought to the company's processing warehouses, oxygen is removed from it and stored in the cold storage at minus 5 degrees Celsius. This ensures there is no deterioration of the product. The tea is then shipped to customers within five days. "Even if the customer makes drinks our tea after two years, he would find it tastes fresh," says Dugar, of the innovative technology.

One of the challenges that Dugar faced was that though there are a lot more people drinking tea in India, not many know that there are 200 to 300 varieties of tea. Worse, this mindboggling variety makes it difficult for the tea lover to decide which one to start with! To make that choice easier, when a customer goes to teabox.com, he is asked to rate his preference for chocolates, fruits, vegetables, spices, herbs, or even fresh grass. The site’s algorithm curates the responses and provides a selection of teas that it feels is suited to the potential customer’s palate. The customer is then sent three varieties of the curated product after payment is made. Every shipment includes a sample of another tea.

The major market for Teabox is outside India. “We have delivered over 30 million cups’ worth of tea to customers in 93 countries in the last three years,” says Duggal.

Expensive teas

The company sells 300 varieties of tea ranging in costs from Rs 6,000 for green teas to Rs 1.5 lakh for white tea and other super premium varieties. The best selling tea at Teabox is the white tea for its fruity notes. The first flush produced in spring between March-May is another hot favourite of its consumers. It sells for Rs 30,000 a kg.

"I hope to give a Silicon Valley makeover to our tradition-bound tea industry. I want to introduce newer varieties of teas that are fresh and delicious that people can have anywhere in the world," he says.

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